Wednesday Morning Cheat Sheet: 3 Stories Moving Markets
Markets were mixed in Asia on Wednesday. Last week’s volatility in the Nikkei seems to have spooked traders and observers who are suggesting that the near future will hold both risk aversion and volatility. Japan’s index closed the day up 0.10 percent as the yen strengthened to 101.5450 against the dollar. The Hang Sang closed down 1.61 percent, while the S&P/ASX 200 closed up 0.08 percent.
European markets were lower in mid-day trading following some pessimistic news from the OECD and a weaker-than-expected jobs report out of Germany. Germany’s DAX was off 1.49 percent, London’s FTSE 100 was off 1.47 percent, and the STOXX 50 index was off 1.27 percent.
U.S. futures at 8:30 a.m.: DJIA: -0.59%, S&P 500: -0.59%, NASDAQ: -0.53%.
Here are three stories to keep an eye on:
1) How Many Homes Are Still Underwater? The historic amount of monetary easing from the Federal Reserve has acted like a life preserver to the real estate market, but many Americans still find themselves underwater or anchored to their current home.
In the first quarter of 2013, the national negative equity rate declined to 25.4 percent of all homeowners with a mortgage, according to Zillow’s Negative Equity Report. While this is an improvement from the previous quarter, another 18.2 percent of mortgaged homeowners do not have enough equity to afford a move. Across the nation, a little more than 13 million homeowners with a mortgage owe more than their home is currently worth… (Read more.)
2) German Unemployment Unexpectedly Rises: Germany’s unemployment rate remained unchanged in May at 6.9 percent, but the number of unemployed people unexpectedly rose to 2.96 million. The increase — a seasonally-adjusted 21,000 — is the largest in four years, and emphasizes how fragile the region’s labor market is.
The European Union will update its official unemployment figures on Thursday, but there is little expectation for a material improvement in the high rate of joblessness. The previous report showed unemployment at 12.1 percent across the EU27, with a 44.6 percent long-term unemployment share.
A separate report showed that the German consumer price index increased 0.4 percent on the month and 1.5 percent on the year, slightly more than expected but in line with the generally subdued inflationary pressures that the region has been dealing with.
3) OECD Cuts Global Economic Outlook: The Organisation for Economic Cooperation and Development projects that global real gross domestic product will increase by 3.1 percent in 2013 and by 4 percent in 2014, down from previous forecasts of 3.4 and 4.2 percent growth, respectively. The revised estimate, released with the latest Economic Outlook report, suggests that historically high unemployment is the biggest challenge facing recovering economies around the world.
“The global economy is strengthening gradually, but the upturn remains weak and uneven,” said OECD Secretary-General Angel Gurría. “Supportive monetary policies, improving financial market conditions and a gradual restoration of confidence are at the root of the recovery. Also, the fiscal adjustment of the last few years is beginning to pay off. Several countries are close to stabilising their government debt-to-GDP ratios and ensuring a gradual decline in indebtedness over the longer term.”
The report strikes an interesting and important pro-growth stance that has struggled to gain traction with many policymakers in the post-crisis era. Federal debt has become a headline issue and in Europe and the United States spending cuts have been championed as a means to reduce deficits. However, a growing body of economists — including the OECD — suggest that too much austerity too quickly can actually harm mid- and long-term growth.
Don’t Miss: How Many Homes Are Still Underwater?